Module Nr' 1, Developing managers to develop social enterprise

1
Projekt delno financira Evropska unija

• Module Nr. 1, Developing managers to develop
  social enterprise
• Bob Doherty
• Liverpool Business School
• E-mail R.Doherty_at_ljmu.ac.uk

2
Module OneUnderstanding the concepts forms of
Social Entrepreneurship and CSR
3
Day One outline

• Introductions
• Short Film
• Group Discussion on Growth of Social Economy
• Key Definitions
• Forms and positioning
• UK Perspective

4
Why social entrepreneurship?

• Significant growth of the social economy in most
  industrialised countries (Defourney and Borgaza
  2001).

5
Group Task Brainstorm

• Working in groups spend 10 minutes discussing why
  the significant growth of the social economy in
  most industrialised countries?
• This will be presented by the group on a
  flipchart.

6
Why Growth?

• Renewed expression of civil society against a
  background of..?
• Throughout Europe increasing number of
  initiatives led by a new entrepreneurial spirit
  based on social aims (Defourney Borgaza 2001)

7
Key Issues

• There is no necessary reason why the standard
  business or plc should be the only enterprise
  model - Andrea Westall 2002 (Deputy Director
  NEF formerly Head of Policy at the Foundation for
  entrepreneurial Management)

8
(No Transcript)
9
Overview of the social economy

• Collection of organisations between the
  traditional private sector and the public sector
  (some times called Third Sector)

Social Economy
Social Enterprise
Socially Rep.Business
Private Sector
Gov.
Charities
VCOs
10
Social Entrepreneur

• Somebody who identifies and brings to life new
  business opportunities but who is motivated by
  public and social good rather than the need for
  personal profit
• Social Enterprise Coalition UK

11
Social Entrepreneurship

• Global phenomenon
• Driven by new breed of pragmatic, innovative and
  visionary social/environmental activists and
  their networks
• Uses a mix of business, charity and social
  movement models to reconfigure sustainable
  solutions to community challenges (Nicholls 2006)

12
Social Entrepreneurship

• Higher employment rates at lower cost
• 2.1 billion Fairtrade Certified goods market
• For social entrepreneurs the social mission is
  explicit and central, mission related impact
  becomes the focus not wealth creation (Dees 1998)

13
Definitions

• A social enterprise is a business with
  primarily social objectives whose surpluses are
  principally re-invested for that purpose in the
  business or in the community, rather than being
  driven by the need to maximise profit for
  shareholders and owners
• DTI, Strategy for Success 2002

14
Social Entrepreneurship

• Innovative and effective activities that focus
  strategically on resolving social market failures
  and creating new opportunities to add social
  value systemically by using a range of resources
  and organisational formats to maximise social
  impact and bring about change
• (Nicholls 2006)

15
Definitions

• Social enterprise means an organisation that
  trades in the market for a social purpose
• Social Enterprise Coalition Theres more to
  Business than you thinkA guide to Social
  Enterprise 2003

16
The Social Enterprise Alliance in the USA

• Defines social enterprise as
• An organisation or venture that advances its
  social mission through entrepreneurial earned
  income strategies

17
Organisation for Economic Co-operation and
Development (OECD 2006)

• Broad international definition
• Organisations with different legal forms in
  different countries, which are organised in an
  entrepreneurial spirit to pursue both social and
  economic goals. Social goals prioritise solutions
  to unemployment, social cohesion and social
  exclusion. These organisations can be urban or
  rural based.

18
Definitions

• Social Enterprise is a loose umbrella term
  which raises the awareness of a variety of
  organisations that highlight alternative ways to
  do business that directly incorporate social and
  environmental concerns. This gives the
  possibility of creating revenue streams that
  enable an organisation to create sustainable
  social change without being reliant on time
  limited funding or charitable donation
• Andrea Westall 2002 (Deputy Director NEF)

19
Definition Community Enterprise

• Those social enterprises located at
  neighbourhood or district level and rooted in the
  locality they seek to benefit, a subset of social
  enterprise
• (Pearce 2003, Chp 2, pge 28)

20
Corporate Social Responsibility

• CSR means that a corporation should be held
  accountable for any of its actions that affect
  their people, their communities and their
  environment. It implies that negative business
  impacts on people and society should be
  acknowledged and corrected if at all possible.
  It may require a company to forgo some profits if
  its social impacts are seriously harmful to some
  of the corporations stakeholders or if its funds
  can be used to promote a positive social good 
• Post, Lawrence and Weber 1999

21
Corporate Social Responsibility

• CSR is the degree of (ir) responsibility
  manifested in a companys strategies and
  operating practices as they impact stakeholders
  and the natural environment day to day. Some
  level of responsibility is integral to any
  corporate action or decision that has impacts.
  CSR cannot be avoided because it is the root or
  foundation of Corporate Citizenship.
• Waddock (2004)

22
British Governments Definition of a responsible
Organisation (DTI CSR Report 2007)

• A responsible organisation does three things
• Recognises that its activities have a wider
  impact on society in which it operates
• Takes account of the economic, social,
  environmental human rights impact of its
  activities across the world not just narrow
  economic focus
• Seeks to achieve benefits by working in
  partnership with other groups organisations
• http//www.csr.gov.uk/

23
Sustainable development

• Most common usage of sustainability is in
  relation to sustainable development
• Sustainable development is development that meets
  the needs of the present without compromising the
  ability of future generations to meet their own
  needs (World Commission on Environment and
  Development (WCED))
• Intragenerational equity
• WCED aim of eradicating world poverty and
  inequity Intergenerational equity

24
Sustainable development broadening of the concept

• Roots in environmentalism environmental
  sustainability
• Expansion to include social ad economic aspects
• The Triple Bottom Line
• Elkington, J. (1997) Cannibals with Forks, the
  Triple Bottom Line in the 21st Century

25
Components of sustainability
Triple bottom line (TBL)
Social
Economic
Environmental
26
Triple Bottom Line

• Many issues e.g.
• Environmental can future generations enjoy the
  same living standards as us without a reversal of
  the trend towards ever more production and
  consumption. Carrying capacity of the Earth, see
  for instance, Pearce, D. (1991) Blueprint 2,
  Greening the World Economy. Earthscan
  Publications Ltd
• Economic short term explosions of profit at the
  expense of long term shareholder value e.g.
  dot.com bubble in 2000. Bribes undermining
  market mechanisms. Corporate accounting tricks
  to avoid tax payments
• Social approaches less mature. Social justice
  is the key issue. Contrast of living standards
  and quality of life between developed and
  undeveloped countries and within developed and
  undeveloped countries

27
Common Characteristics of Social Enterprises

• Enterprise Orientation- directly involved in
  producing goods or providing services to market,
  part of third sector but characterised as more
  entrepreneurial and self financing
• Social Aims- have explicit social aims such as
  job creation, providing goods or services.
• Social Ownership- based on participation by
  stakeholder groups
• (DTI- Strategy for Success SE Coalition)

28
The locus of social enterprise
Source AMION Consulting 2001
29
Spaces of social enterprise
GOVERNMENT
VOLUNTARY SECTOR
MAINSTREAM BUSINESS
SOCIAL ENTERPRISE
30
Size of Social Enterprise in UK

• 55,000 social enterprises in the UK
• Generating more than 27 billion turnover
• More than 8 billion to GDP
• Social enterprises account for 5 of all UK
  businesses with employees
• (Cabinet Office 2006)

31
Social Economy is important because

• Job creation in new enterprises
• Contributes to efficient competition
• Offers potential for new forms of
  entrepreneurship
• Meets new needs especially of marginalised
  communities
• Favors local participation and voluntary work
• Enhances solidarity and cohesion
• Provides training and employment to disadvantaged
  communities

32
Types of Social Enterprise in UK

• Development Trusts (www.dta.org.uk) community
  based regeneration
• Co-operative - associations of persons united to
  meet common economic and social needs
  www.cooperatives-uk.coop
• Credit Union providing access to finance for
  socially excluded

33
Types of Social Enterprise in UK

• Intermediate Labour Market-providing training and
  work for the long-term unemployed.
• Trading arm of charities
• Social Firms- providing employment and training
  to people with disabilities and other
  disadvantaged groups e.g COPE on Shetland
  (www.socialfirms.co.uk)
• Employee owned businesses are companies that are
  wholly or substantially owned by the people who
  work in them (www.employeeownership.co.uk)

34
Types of Social Enterprise in UK

• Community enterprises- geographical focus
• Housing associations social enterprises in
  charge of managing housing stock for socially
  excluded people www.housingcorp.gov.uk
• Leisure trusts- local authority in-house leisure
  services turned into social enterprises.
  (www.sporta.org)
• 100 Fair trade companies (www.fairtrade.org.uk)

35
(No Transcript)
36
FAIRTRADE  The definition of
Fairtrade is  " Fairtrade is a trading
partnership based on dialogue, transparency and
respect, that seeks greater equity in
international trade". It contributes to
sustainable development by offering better
trading conditions to and securing the rights of,
disadvantaged producers workers- especially in
the South. The Fairtrade Foundation (FTF)
Annual Review (2003)
37
Commodity Prices in Real Terms Cocoa
Figures from FAO The State of Agricultural
Commodity Markets 2004
38
THE DAY CHOCOLATE COMPANY
Philip Kumea
The story of how small scale cocoa farmers came
to own an equity share in a Fairtrade chocolate
company and its brands Divine and Dubble
Fairtrade Chocolate
39
(No Transcript)
40
The Day Chocolate Company (set-up in 1998)

• The overall strategic aim of Day and its
  partners is to improve the livelihoods and
  opportunities for smallholder cocoa producers in
  West Africa by establishing their own branded
  proposition in the UK chocolate market and paying
  a Fairtrade price for all the cocoa used. (Tiffen
  1998).

41
Figure 1. The DAY/KKU Value network
Cocoa farmers Village Societies (1200 in 2006)

• LEGEND
• Ownership
• Flow of goods and cash
• One way cash flow

Kuapa Kokoo Farmers Union (KKFU) Village
societies elect a Society Executive from these 7
member Regional Executive Councils elected, and
from these a 13 member National Executive Council
(NEC) is elected.
Independent retailers (UK)

• Kuapa Kokoo Ltd (KKL)
• 97 of shares held by KKU
• (founders hold rest)
• Board of Directors
• 6NEC farmers
• 1 Managing Director
• 4 Senior managers
• Staff of 26 Society
• Development Officers

PROFITS
PROFITS
Day Chocolate Company KKFU (45 shares, 2
seats) Twin Trading (42 shares, 2
seats) Oikocredit (12 shares, 1 seat) Comic
relief (1 seat) Christian Aid (1 seat)
Wholesalers, ATOs etc
Kuapa Kokoo Farmers Trust Disburses FT
premiums, DCC/KKL profits and other funds as
decided by board of trustees - 4 NEC farmers - 1
KKL manager - 4 local professionals
Storage and distribution
Cocoa Marketing Company (CMC) Monopoly
exporting Subsidiary of the Parastatal
cocoa marketing board (COCOBOD)
Supermarket distribution depots
Chocolate Manufacturer
UK Supermarkets (Tescos, Sainsburys, Co-op)
FLO approved Cocoa Processors
FAIRTRADE PREMIUMS
Sole European Importer
Adapted from Ronchi (2001)
42
(No Transcript)
43
What are Community Interest Companies?

• Limited liability companies for social
  enterprises
• New Legal Form for social enterprise
• Created by the Companies (Audit, Investigations
  and Community Enterprise) Act 2004 and the
  Community Interest Company Regulations 2005

44
Political context

• Pearce explained The striking development of the
  last five years has been the growth in political
  and administrative support for Social Enterprise
  in the UK, especially since the 1997 General
  Election (Pearce 2003, pg. 91 )

45
Political Context

• Strategy for Success (2002) and Scaling New
  Heights (2006)
• New Office of the Third Sector (OTS) within the
  Cabinet Office.
• Futurebuilders for VCS development
• Partnership in public services- Third sector
• Strong and Prosperous communities- The local
  Government White Paper
• Regional Government Support

46
UK Government

• Cross parliament interest in social enterprise
• Minister responsible for social enterprise- Ed
  Miliband MP

47
Values of The Social Economy

• Co-operation
• De-centralisation- investing power in people
  communities
• Inclusivity- stakeholder approach
• Good work
• Sustainability
• People centered embracing people, culture,
  environment

48
Stakeholder theory

• Stakeholders a definitions
• A stakeholder is any individual or group who can
  affect or is affected by the actions decisions,
  policies and practices, or goals of the
  organisation Freeman 1984
• Stakeholders are all the people and groups
  affected by, or that can affect, an
  organisations decisions, policies and
  operations.
• Post Lawrence and Weber 1999
•  

49
What is a Stake?

• An interest or share or right that a group or
  individual has in the outcome of an organisations
  actions

50
Stakeholder Approach

• Method of identifying multiple political, social,
  legal, economic and ethical claims of many
  constituencies

51
Traditional Management Model (Crane. A Matten.
D (2004) Business Ethics, Oxford University Press
pg 51)
Suppliers
Customers
FIRM
Employees
Shareholders
52
Stakeholder Model (Crane. A Matten. D (2004)
Business Ethics, Oxford University Press pg 51)
Local Government
Suppliers
Employees
EU
FIRM
Competitors
Customers
Government
Civil Society
Shareholders
53
Major Questions

• Who are our stakeholders?
• What is their stake?
• What responsibilities (economic, legal, ethical,
  political,) do we have to our stakeholders?
• What strategies, actions or decisions should we
  take to best deal with those responsibilities?

54
Stakeholder Management

• What is equitable just fair and good for our
  stakeholders?

55
Group Task

• Draw stakeholder map for The Day Chocolate
  Company
• Take 10-15 minutes to develop this on flipchart

56
Concluding Thoughts

• Social enterprises challenge the myth of the
  superiority of the private sector in efficiency
  and innovation
• The definition creates space and impetus for
  exploring new innovative models

57
References

• The Emergence of Social Enterprise (2001)
  Defourney, Jacques Borgaza, Carlo Borzaga, Carlo
  (University of Trento, Italy), Defourny, Jacques
  (University of Liege, Belgium)
• Managing and Measuring Social Enterprises (2003)
  Paton, Rob Sage Publications SAGE PUBN INC
• Social Concern and Social Enterprise (2000)
  Gulliver, Kevin Brewin Books Limited
• Social Enterprise in Anytown (2003) Pearce John,
  Calouste Gulbenkian Foundation
• Value led Maket Driven, Social Enterprise
  Solutions to Public Policy Goals (2002), Andrea
  Westall
•  

58
References

• Crane. A Matten. D (2004)
• Business Ethics, Oxford University Press
• Johnson, G Scholes K (2005) Exploring
  Corporate Strategy Prentice Hall, Europe
• http//www.accountability.org.uk
• Freeman, R.E. (1984) Strategic Management A
  stakeholder Approach. Boston Pitman
• Naylor J. (2004) Management, Second Edition
• Prentice Hall
• Weiss W. J. (2003) Business Ethics a
  stakeholder and Issues Management Approach, 3rd
  Edition, Thomson.

59
Websites

• www.ippr.org
• www.socialenterprise.org.uk
• www.neweconomics.org
• www.dti.gov.uk/socialenterprise
• www.msei.org.uk
• www.theinnercity100.org/research
• www.kpk.pwp.blueyonder.co.uk
• www.concise.mdx.ac.uk